USING COMMON SIZE INCOME STATEMENT DATA The 2009, 2008, and 2007 income statements for Entertainment Enterprises appear on the following page.

Year Ended June 30, 2009 2008 2007 (in thousands) Amount % Amount % Amount %
Total costs and expenses $2,937.3 98.9 $3,225.9 93.1 $3,544.2 89.5 Income before income taxes $ 56.4 1.9 $ 273.7 7.9 $ 455.4 11.5 Income taxes expense 14.8 0.5 107.4 3.1 182.2 4.6 Net income $ 41.6 1.4 $ 166.3 4.8 $ 273.2 6.9 Required:
. Suggest why net income declined from $273,200 to $41,600 while the cost of goods sold percentage decreased each year and selling and administrative expenses remained nearly constant.
. Determine what could cause sales to decline while the gross margin percentage increases.